Banking Industry Gains Momentum

Banker Resource January 2, 2014 — 974 views

The year ended on a good note for the banking sector when the industry displayed signs of accelerated growth. This was for the first time since after spring that the banking industry experienced such growth, according to the latest Index of Banking Activity given out by American Banker.

It revealed that the index of November went up to 54.9 as compared to 54.6 recorded in October. This was counted as the first monthly increase to show up since May, on the index which is a representative of the accelerated expansion. However, this reading is down compared to the mark of 55.8 which it achieved around the same time, last year.

The Ups and Downs

There was a rise in commercial lending after the month that marked the end of the government shutdown. Also, applications for commercial loans saw an increase in November. This increase came out as reading of 56 in numbers. Approvals also gained momentum with a standing of 57. The October reading for both these stood respectively at 53.4 and 52.8.

Consumer lending succeeded in maintaining its stability which was a good sign as it had seen a decline in the past two consecutive months. The application and approvals reading stood at 50, which was the same reading as last month.

However, the bankers still reported that the growth in loan portfolios was rather slow in November. Apart from that, they also saw challenges with commercial loan pricing which stood at a reading of less than 50. This was for the second consecutive month that commercial loan pricing couldn’t even cross the 50 mark. Before this, it had remained favorable for the sector for six months straight.

A Look at the Concerns

In a recent interview Chief executive of Rockville Financial (RCKB), Bill Crawford, said that the interest rate has been terrible for some time now and chances are that they will continue to worsen the situation for the banking industry for a considerable amount of time. He also mentioned that it is quite tough to fight this problem.

As far as 2014 is concerned, most bankers will experience elevated competition along with a sluggish economy. Chief executive of First Horizon (FHN), Bryan Jordan, said during a meeting with investors and analysts that the industry will experience fairly limited economic growth, less demand for incremental loan and low rate of interest for financial institutions. This will require them to make the most of every opportunity that shows up for them, resulting in high competition.